Tokyo: Asian shares and the euro consolidated from the previous day’s rally on Tuesday, as investors cautiously wait for European policy makers to outline details of how they will leverage their bailout fund so it can help Italy or Spain should they need aid.

MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.3%, after jumping more than 2% on Monday, while Japan’s Nikkei was up 0.8%, moving further away from two-and-a-half year lows hit last week.

Markets shrugged off more news on rating agencies, including a French media report citing several sources as saying Standard & Poor’s could change the outlook of France’s top-notch rating to “negative" within the next 10 days.

“Let’s bear in mind we had a strong rise yesterday ahead of the moves in Europe and the U.S. so to some extend this buying momentum was led out of Asia yesterday, so we are not following as hard today," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

Euro zone finance ministers will meet later on Tuesday with detailed operational rules for the region’s bailout fund, the European Financial Stability Facility (EFSF), ready for approval, paving the way for the €440 billion facility to draw cash from investors.

With a history of initiatives that fall short of market expectations, however, analysts at Barclays Capital warned it would be premature to be confident that Europe’s leaders are close to a solution to the 2-year-old debt crisis.

“So far, European summits have delivered compromise solutions that have been deemed either less than credible or too complex by markets," they said in a note.

“The recent round of proposals does not seem any different and suggests that investors should exercise caution buying risky assets, especially after a rally that has been aided by light market positioning."

RISK-OFF, MOSTLY

Commodities, a gauge for investor risk appetite, took a breather after Monday’s rally, with gold steadying above $1,700 an ounce and oil slipping after a rise of more than $1 on Monday.

“Compared to the rally in the US, gains are quite subdued in a number of equities markets in Asia," said Frances Cheung, senior strategist for Asia ex-Japan at Credit Agricole CIB in Hong Kong. “We are fairly cautious, given very few reasons to be optimistic, and I doubt if optimism can be sustained throughout the week, especially with many meetings and bond supplies."

The MSCI world equity index jumped 3.1% on Monday while US stocks snapped a seven-session losing streak, with both the Dow Jones industrial average and the Standard & Poor’s 500 Index up nearly 3%.

Germany and France are reportedly working on proposals for a more rapid fiscal integration in Europe ahead of a European Union summit on 9 December, but the European Central Bank has defied calls for a stepped-up role in helping resolve fiscal problems within the 17-member euro zone.

Concerns about the ability of the highly-indebted euro zone countries to pay off their ballooning public debt have made their sovereign bonds a prime target for market attacks, pushing yields to levels widely seen as unsustainable.

Market players were closely watching the outcome of this week’s auctions, with up to nearly 19 billion euros in new bonds expected to be issued by Belgium, Italy, Spain and France.

Italy plans a 8 billion euros bond sale later on Tuesday. Ten-year bond yields were stuck above 7%, a level that forced Greece, Ireland and Portugal to seek international aid.

Tension in euro zone money market and banks’ reluctance to lend to each other further intensified on Monday, with three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest rate expectations and banks’ appetite for lending, rising to 1.477% from 1.475%.